mortgage chattanooga

mortgage chattanooga

A lot of things go into credit approval for a mortgage chattanooga or any debt for that matter. The first thing that happens when you apply for a mortgage, is a check of your credit worthiness is done by one or all of the three major credit bureaus … Equifax, Experian and TransUnion. A credit “score”, or FICO, is calculated which reflects your history of paying bills such as credit cards, loans for cars and other debts you may have.

For example IF your credit score is:

720-850 your interest rate might be 5.793%

700-719 your interest rate might be 5.918%

675-699 your interest rate might be 6.456%

620-674 your interest rate might be 7.606%

560-619 your interest rate might be 8.531%

500-559 your interest rate might be 9.289%

So you see ... even though the advertised rate might be 6.5%, if your score is better or worse than average, the interest rate you qualify for might be dramatically different from your neighbor with a higher or lower score.

The score is a value assigned to several standards used in making a lending decision. These criterion include how much you owe on non-mortgage accounts like credit cards, your payment history and credit history. People (someone who actually scores your credit) will take the information from the report and plug it into formulas that calculate the value representing the amount of risk a lender may responsibly take. That value is used as a gauge and is compared to other borrowers with a similar profile. On examination, a lender is able to gauge your credit worthiness and can then make an informed decision as to whether or not to lend you money. The Fair Isaac Corporation calculates the FICO score which ranges from 300 to 850. The higher FICO number the more credit worthy you are from a lenders perspective.

This is a major component but far from the only one. Lenders look at payment history like; late payments, ability to pay (how much money can you afford to borrow with your given earnings power), earnings potential and income to name a few. If you are self employed or are a long time employee of a major company, these data have an influence too.

Applying for a mortgage chattanooga is different than applying for a layaway account at a department store or a credit card. Exposure for a lender to a long term debt is different than a month to month credit card for example. Different, in that a credit card company can cancel your card, having been exposed only to the limit of the card, but evicting you from a home for non-payment is a much different matter, so the lending on these two kinds of debts are different. In a mortgage, the lender wants you “involved” in the debt and will generally ask for a partnership deal … they want you to have a financial interest in the debt … that is they want a down payment of 20% - 25%. This is very common as they now have a customer that is interested in keeping payments up on the debt so as not to loose their investment. Not having the down payment doesn’t mean you’ll not get the loan, as there are many “no down” loans being made today. If however, there is no down payment the lender will likely ask for an insurance policy (PMI -- private mortgage insurance) be taken out at the expense of the borrower to reduce lender's risk of the borrower just vacating the property at the lender's expense of reselling the property or even sitting on it for a long period until it can be resold. So a mortgage is the type of loan that requires a higher score to qualify at a favorable rate. If you have a low credit score, your chances of getting a loan are better if you’re willing to participate in a larger way … that is have a bigger down payment. It demonstrates to the lender you’re willing to carry a bigger burden … that is accept more long term risk if a loan is given and you’ll likely be provided with a better interest rate too boot. Do lenders all “score” you the same? No they don’t. So shop around for the best rate.
Imperfect credit -- or better rate?

If your scores aren’t perfect or you’d like to qualify for a better rate, there are several things you can do prior to making application.

• Get a credit bureau report. Don't worry about the report just be aware of what it says so you'll have no surprises at the lenders and you'll have a better idea of what to expect from a rate perspective.
  
• Do not apply for credit for other loans simultaneously … like credit cards.


• Reduce your debt. Pay off credit cards and other loans. Reducing your credit card use to just 20% of the available credit will help.


• Quit using credit cards for several months prior to applying for the mortgage loan. Better, don’t use credit cards for anything other than emergencies or when you’re on a trip or have little access to cash or checks.


• If you insist on using credit cards regularly, pay the entire amount at the end of the billing cycle. Don’t carry balances forward.


• Make certain to pay regularly scheduled payments to lenders on time. Late payments work against you more than most other components.


• Manage your credit responsibly.


• Increase your income. Education is the prime method. The more income, the more you can borrow if all the other components are good.

There are many things that go into obtaining a mortgage loan, even the way you look! Act responsibly, have a steady job, increase earnings, reduce debt, pay your bills on time and don't wear shorts and flip flops to a lender meeting are key components. Look professional -- be professional to get the best results.

Every realtor has up to the minute information on mortgages in Chattanooga. It means, buying a property by borrowing money through a mortgage broker and mortgage lender for your dream home.
Mortgage Calculator.

First check the current interest rates. Then use our calculator to see results for residential purchases. Realtor sites can help with rates, private placements, home loans, payment amortizations and equity loans. Examine your note plan (principal and interest) to ensure it's affordable. 30 and 15 year calculations are made with interest only, zero down, ARM, PMI, balloon notes and special payments. There are special finance options too like interest only ARMs. Ask the broker.

One last thing. Do you realize the difference between todays rate and 4.75% on a home loan of $166,800 (national average on a 20% downpayment on a median cost home) is less than $60 per month. Don't expect 4.75% any time soon and wait for lower rates in hopes of a big savings! The Feds just a few days ago indicated that Freddie Mac and Fannie Mae may be overloaded with mortgages and the FEDs might reduce their participation with legislation. What does this mean to you? Mortgages may be more difficult to get in the future. More. This is not a push for you to buy something ... but clearly rates are on the rise. Offsetting that is the cost of homes ... an all time high.
Mortgage Quote.

Quotes from lenders is an easy task. Ask! Contact a real estate agent/broker and let them help. Getting a quote, however, is just a small step in the process. We're really talking about qualifying for a loan. Before you go home buying, ask how much can I borrow? After qualifying, lock the quoted rate, guaranteeing a payment obligation you can afford. Ask about APR too, so you can compare quotes easily.
Mortgage Rates on the Rise.

Since late February, rates have risen from a low of 5.01% to 5.6%, a 11.8% rise as of October 14, 2005 and up slightly recently. So, if you're shopping for low rates ... you've found them. Rates may not top 6% for several more months but this is speculation. A recent survey of the mortgage banking industry suggests short and long term rates will increase however. Time to buy? Maybe. They are no doubt low and maybe will not be here again anytime soon. The lowest rate may not be the best for you. Recalculate the numbers to be sure. Remember there are other costs which might justify a higher rate.

mortgage chattanooga